Crowdsourcing a Business Plan

Friday Mar 5, 2010 by Doug Levin - founder, former CEO and actively on the Board of Directors of Black Duck Software

Over a caffeine fix with a VC-friend of mine, we debated which is hardest to secure these days: Seed funding or a Series A or B round of funding. We did not arrive at a definitive answer to this question but it appears that securing a Series A is just as, if not more than, difficult to secure than a Series B.

During our conversation, I discovered that he – although wired-in – did not know about a relatively recent trend to “crowdsource a business plan” – especially for social and mobile software ventures. So, I decided to write this blog post for VentureFizz with the hopes of expanding the discussion.

Crowdsourcing is a problem-solving and production approach that makes use of “the wisdom of the crowd” as it taps into online communities. Ideally, problems are communicated to a crowd of people with an open request for solutions. The crowd presents solutions and the originator sorts through them for the best ones.

Think about it.  A meeting with one person can generate many ideas but yield one or two gems that can be integrated into a business plan and, subsequently, the company.  Presenting an idea to multiple people who self select to be part of generating ideas, an entrepreneur collects multiple gems all at once. 

There are companies which use a crowdsourcing approach as the engine that drives their internal business model, such as Affinova, Amazon Mechanical Turk, Local Motors, Logo Tournament and uTest. These companies are “crowdsourced services” which conduct distributed labor or knowledge at a problem – like market research, design (cars in Local Motors case), testing and other work.

Crowdsourcing a business plan means emailing or posting online and “taking meetings” with many people to gather their input and assemble the business plan from there. Many times a core idea and parts of the plan comes from the “entrepreneur” but key elements come from others. Entrepreneurs without marketing expertise, for example, can crowdsource a go-to-market strategy from a combination of input from a marketing manager, VP of Marketing, and former CEO. In the extreme, the entrepreneur or business founder becomes the organizer of information and input gathering activity that results in a business.

To some extent, most business plans are crowdsourced, that is, they are assembled with contributions from advisers, board members and experts as they review and discuss it with others. For Black Duck Software, I talked to 35 potential customers who contributed important bits of information about the psychology of the market, its potential total size, and the purchasing cycle to the company’s business plan which are still valid today. Subject matter experts on direct, tele- and channel sales as well as direct marketing contributed to the plan. I think the “wisdom of the crowd” is very real and very helpful.

Beyond crowdsourcing your business plan, how about crowdsourcing your business model?   Or crowdsourcing which features make the most sense for a product? When is crowdsourcing too much?

When there is no center of gravity for a venture or when there are too many “advisers” in the mix or when there’s a bunch of ideas floating around and nothing is getting done, then there’s too much crowdsourcing.  You see this when a company does not have a business model that makes sense or a founder without staying power. While the market will figure out a lot of these problems, these situations makes it difficult for companies with good ideas to break through an already noisy operating and funding environment.  In a slow funding environment, like todays, where there’s too many excuses not to fund an idea like “I will wait until the next one comes around – because there will be another one almost certainly – and we’ll fund that one.”

When I talked about the theme of this blog post with a friend teaching locally he asked: “Has there been a dumbing-down or trivializing of the entrepreneurial process?”  The answer to that question is no – evolution is happening here. One cannot ignore that startup activity is up and there are new funding models (for example, innumerable seed rounds of less than $1 million, etc.) to get started with low capital expenditures.  So why not crowdsource a business? I think that’s what we are seeing.

Getting lots of input – especially from potential customers – is mostly invaluable. The crowdsourcing approach to building a business plan is interesting, but does not substitute for assembling a great team, doing a couple of all-nighters and talking to potential customers.  The fit ties to the goals of the venture and entrepreneur. If the company crowdsources its business model and it is successful and has a good exit, all is good. If not, then no.

What are your thoughts on crowdsourcing a business plan?

Doug Levin is the founder, former CEO and actively on the Board of Directors of Black Duck Software.  He helps run the Clean Energy Fusion Center, a clean tech incubator, in Waltham, MA. He is also an adviser to Cadio, SOCIALtality and Triangulate and crowdsourcing ideas for his next startup.

< back to all blog entries